MVL, TAAR and Condition C

[Lance]

It is worth reviewing the precise terms of Condition C.



My emphasis. This is deliberately broadly drawn. It is precisely to allow HMRC the flexibility to argue that a similar business activity meets the condition. So, yes, HMRC could certainly argue that the situation in the OP meets the condition because it is “a similar trade”. Then the question arises as to whether they would and whether they would succeed in their argument. On the former, we can speculate that, given the occasion, they certainly would make this argument. As to whether they would succeed, that is currently untested for a situation like the OP, but I think it becomes harder (overall, not specifically in terms of C) if the OP can clearly demonstrate that they had not planned this all along (i.e., that there was a clear break and a new opportunity arose, unexpectedly).

exactly.......

The intention is to prevent unfairly taking a tax advantage, not to stop someone starting a new business.

As for NLUK's point, I don't think there will be fines and punishment unless fraud can be proven.
If the OP is serious about the new business, then the OP is going to start the new business. The OP just needs to be aware that HMRC might come looking for a refund on the ER discount.

[jamesbrown]

It is worth reviewing the precise terms of Condition C.

Condition C: the individual receiving the distribution continues to carry on, or be involved with, the same or similar trade or activity as that of the distributing company at any time within two years of the distribution.

My emphasis. This is deliberately broadly drawn. It is precisely to allow HMRC the flexibility to argue that a similar business activity meets the condition. So, yes, HMRC could certainly argue that the situation in the OP meets the condition because it is “a similar trade”. Then the question arises as to whether they would and whether they would succeed in their argument. On the former, we can speculate that, given the occasion, they certainly would make this argument. As to whether they would succeed, that is currently untested for a situation like the OP, but I think it becomes harder (overall, not specifically in terms of C) if the OP can clearly demonstrate that they had not planned this all along (i.e., that there was a clear break and a new opportunity arose, unexpectedly).

[eek]

As NLUK says it's the same trade that is the issue here which is going to be far broader than a SIC code.

So the better question is why did the company close? How long is there between the company closing and re-opening and what did you do in between.

[northernladuk]

Forget SIC codes. You are just using them as a smoke screen and they are sufficiently broad to mean they have nothing to do what trade you were doing. You could be consulting under both and you could be working as app provisioning under both.

The bottom line is what work are you doing. It mentions trade so I believe it's going to be pretty broad. If you were an IT consultancy providing whatever services the client needed and will now be IT consulting on a project delivering application provisioning it's still IT consultancy.

For the difference between the two SIC codes you mentioned to stick your method of delivery must be completely different. Consultancy could have been personal constultancy but app prov will be delivering the customer a service. That's probably be ok.

Look at your trade and be honest with yourself. No point kidding us to help us kid you.

pay some extra tax.

Not really. They will be paying a double figures percentage back which they've already pocketed so won't feel like some extra tax. There is then the fine which could be double the extra money they want and interest as a cherry on top. If the OP wants to risk it then go for it but don't underestimate how much this could be.

[bcontractor]

Also don’t forget that all 4 conditions need to apply. Therefore your reasons for liquidating might play in your favour, depending on your circumstances.

[Lance]

I would say it was sufficiently different.
But it’s quite subjective really.

If it was too close what would you do? I take it you’d still setup the new business anyway... so go for it, but plan a worst case scenario where you have to pay some extra tax.

[mfh17]

Hi all ... I closed a one-man tech consulting business (SIC: 62020) using an MVL and got Entrepreneurs Relief (ER). Under TAAR, I am not allowed to work in the same or similar trade for 2 years, else I lose my ER. I now want to co-found a new business in application service provisioning (SIC: 63110). I need to understand if this will be considered sufficiently different so as not invoke condition C of TAAR, so I can retain my ER

Can anyone help me understand how HMRC would define “similar” in this case. I have read that HMRC might want to label all business in the IT sector as being ‘similar’ whereas I think it quite reasonable to define a consulting business as being very different to a software / application provider business (my new business will do no consulting, we would only sell licenses to use to the software we have written). I can see that "reasonable self assessment" applies to condition D, but can’t see who decides on condition C, or how

Any thoughts / experience here, please?